BDO sets aside P22 B for bad loans

Sy-led BDO Unibank Inc. is beefing up its war chest versus potential bad loans, allocating a record P22.1 billion in anticipation of the expected economic fallout from the coronavirus pandemic.

To safeguard the bank’s balance sheet, the country’s largest bank decided to allocate another P20 billion in upfront provisions, on top of the P2.1 billion set aside in the first quarter.

“The bank is expecting delinquencies to increase this year with the disruption in business activities, tightness in corporate liquidity, lower consumption levels, and contraction in GDP by as much as 3.4 percent based on government estimate,” BDO said in a statement.

The listed bank said it expects actual write-offs or losses to be much less despite the expected rise in its non-performing loan (NPL) ratio.

“The move, following a comprehensive review of its loan portfolio is anticipatory in nature and is meant to safeguard the bank’s balance sheet. The bank’s NPL coverage ratio is currently one of the highest in the industry,” it said.

BDO’s net income declined by 10.2 percent to P8.8 billion in the first quarter from P9.8 billion in the same quarter last year as provisions surged by 77 percent to P2.3 billion from P1.3 billion.

BDO’s capital base stood at P373.2 billion with a capital adequacy ratio (CAR) of 13.8 percent and common equity tier-1 ratio of 12.7 percent in end-March, both above the levels set by the Bangko Sentral ng Pilipinas (BSP) and enough to withstand near-term shocks.

“BDO’s balance sheet remains strong, with capital ratios remaining above regulatory levels despite higher provisions. The move will not impair the bank’s capital. Coupled with a robust business franchise and a culture of resilience the bank believes it will weather the crisis and be in a good position once the economy bounces back,” the bank said.